No time to test economic policies

International Monetary Fund Managing Director Christine Lagarde spoke on Sunday to the World Government Summit held in Dubai, warning of the four dark clouds on the horizon for the global economy. She called for government-level actions against trade tension and tariff rises, financial austerity, uncertainties over Brexit, and the slowing Chinese economy, which could turn into furious storms anytime. Last year, the IMF predicted that the global economy would go downward while lowering economic growth from 3.7 to 3.5 percent. The news is a wake-up call to Korea, which depends highly on trade and exports.

Global investment banks have cast ever-increasing skepticism over this year’s economic growth of Korea. As of end of last November, 11 major investment banks such as Goldman Sachs and Citigroup projected Korea's economy would grow 2.5 percent this year. Even with a small difference, the figure implies economic trends and psychological influence over economic players. In particular, it is worth noting that global investment banks expect export decreases and weaker business investment to continue over the next year onward.

As pointed out by the IMF chair, it is hard to gauge how the four dark clouds flow over Korean economy. Each of the four dark clouds, which is hard to control, will have significant impact on the economy. To be sure, too much skepticism is supposed to be reserved. However, we should stay vigilant. In that sense, optimistic views shared among some ruling party members are rendered risky.

Fiscal expansion may be the sole key to restoring the economy at a time when cuts in interest rates are not an available option. It is better for the South Korean government to pour resources into fields that produce quick results. There is no extra time and resource the government can use to test ideological economic models in hasty manner. Now is the time to review radical policy shift after looking squarely at the realities home and abroad.